Heterogeneity is a key feature of all psychiatric disorders that manifests on many levels, including symptoms, disease course, and biological underpinnings. These form a substantial barrier to understanding disease mechanisms and developing effective, personalized treatments. In response, many studies have aimed to stratify psychiatric disorders, aiming to find more consistent subgroups on the basis of many types of data. Such approaches have received renewed interest after recent research initiatives, such as the National Institute of Mental Health Research Domain Criteria and the European Roadmap for Mental Health Research, both of which emphasize finding stratifications that are based on biological systems and that cut across current classifications. We first introduce the basic concepts for stratifying psychiatric disorders and then provide a methodologically oriented and critical review of the existing literature. This shows that the predominant clustering approach that aims to subdivide clinical populations into more coherent subgroups has made a useful contribution but is heavily dependent on the type of data used; it has produced many different ways to subgroup the disorders we review, but for most disorders it has not converged on a consistent set of subgroups. We highlight problems with current approaches that are not widely recognized and discuss the importance of validation to ensure that the derived subgroups index clinically relevant variation. Finally, we review emerging techniques—such as those that estimate normative models for mappings between biology and behavior—that provide new ways to parse the heterogeneity underlying psychiatric disorders and evaluate all methods to meeting the objectives of such as the National Institute of Mental Health Research Domain Criteria and Roadmap for Mental Health Research.